According to the Wall Street Journal, Fannie Mae and Freddie Mac are going to reduce the maximum value of home mortgages they’re willing to back.

Today, Fannie and Freddie will back mortgages worth up to $417,000 in most places, and as high as $625,500 in some expensive markets. More than 90 percent of new mortgages are backed by the government through F&F. (Loans worth more than those amounts are “jumbo mortgages.”)

But now the agency that oversees them — the Federal Housing Finance Agency — has (according to the Journal) indicated that it’s going to start reducing those limits on January 1, 2014, but hasn’t said exactly what the new limits would be.

…a spokeswoman declined to elaborate on specifics. But in a statement, the agency said a “gradual reduction in loan limits is an appropriate and effective approach to reducing taxpayers’ mortgage-risk exposure…and expanding the role of private capital in mortgage finance.”

The goal is to start getting the government out of the mortgage business — well, out of the giant role its currently playing — and let private capital take over.

A lot of people will get behind that idea: “Get the government out of the housing market” and so on, but NAR has already expressed its… skepticism. “It would be counterproductive to make changes to the loan limits before private capital is fully engaged,” said NAR president Gary Thomas.

So on the one hand you have the idea of reducing the government’s role, while on the other you have the argument that it’s still too soon to mess with the recovery.

Will private capital step in? Sort of. Right now, as the Journal points out, lenders are already competing to offer jumbo mortgages.

During the second quarter, banks made nearly $59 billion in jumbo mortgages, up 20% from the previous-year period to a six-year high, according to Inside Mortgage Finance. “There’s plenty of liquidity in the market to handle a drop in the conforming limit,” said Brad Blackwell, executive vice president at Wells Fargo Home Mortgage, the nation’s largest mortgage lender.

Well, that’s good news. So it won’t be a bad thing to lower the limits, right? Banks are already offering loans without worrying about Fannie and Freddie’s backing.

Just one problem with that. Yes, banks give loans that aren’t backed by the government, but those loans aren’t easy to get. A 20 percent down payment is typical, and excellent credit is required — that means first-time buyers are the ones who are going to have trouble getting loans.

So yes, private capital is ready to step in, at least for people with plenty of cash to put down and excellent credit to back it up. Everyone else… well, there’s always FHA, right?